Groupon IPO: The Financial Magic Under the Gun

Groupon has some ‘splainin to do with the SEC about a convoluted financial metric it has used to promote itself ahead of a planned IPO. So let’s dig into a tongue-twister financial term Deal Journal had never encountered, but now has become front page news.

Introducing: “Adjusted Consolidated Segment Operating Income.”

In its IPO filing last month, Groupon CEO Andrew Mason told investors “We don’t measure ourselves in conventional ways.” He touted three financial yardsticks Groupon considers important, including the aforementioned Adjusted CSOI. That would be Groupon’s consolidated operating income, excluding the costs to land new subscribers and excluding some non-cash charges, Mason explained.

In 2010, Groupon generated adjusted CSOI of $60.6 million. In standard accounting terms, which includes a remarkable $263 million of marketing expenses, Groupon posted an operating loss of$413 million last year. That’s quite a difference.